CFTC sues Minnesota over first explicit state ban on prediction markets

The Commodity Futures and Trading Commission and the U.S. Department of Justice sued Minnesota, Governor Tim Walz, and a handful of other state officials on Tuesday over a newly signed omnibus bill that bans prediction markets in the state.

The lawsuit, filed less than 24 hours after Walz signed SF 4760 into law, argues that Minnesota is unlawfully attempting to regulate federally overseen derivatives markets that fall under the CFTC's "exclusive jurisdiction." 

The complaint describes Minnesota's legislation as "the first outright ban on prediction markets in the U.S."

Under the new law, Minnesota prohibits prediction markets, which allow customers to wager on the outcome of everything from sporting events to weather, and company valuations to goings on in the government. The law is set to take effect on Aug. 1.

The CFTC and DOJ claim that these are federally regulated products and "swaps" that trade on CFTC-approved exchanges, and therefore are outside the authority of states to criminalize or prohibit them.

"This flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere must be preliminarily and permanently enjoined," the complaint reads.

The lawsuit is the latest escalation in a jurisdictional clash between state gambling regulators and federally regulated prediction market platforms like Kalshi and Polymarket.

Several states, including Illinois, Arizona, and Connecticut, have also been sued by the CFTC for attempting to shut down prediction market platforms by arguing they break the states' gambling rules.

The complaint also says the statute wrongfully extends criminal liability to banks, payment processors, media organizations, and sports leagues that advertise, verify, or provide data tied to prediction markets. The CFTC specifically pointed to partnerships that prediction markets have struck with organizations like Major League Baseball, the NHL, Fox, Dow Jones, and the Wall Street Journal.

The Block reached out to Polymarket and the office of Tim Walz for comment.

Minnesota mixed bag

The CFTC has spent the better part of 2026 honing its approach to event contracts under new Chairman Mike Selig. In March, the agency published a formal advisory on prediction markets and launched a campaign seeking public opinion on potential rulemaking.

Minnesota has meanwhile taken a mixed approach toward regulating crypto and blockchain-adjacent services. Earlier this week, Walz signed legislation allowing banks and credit unions to offer crypto custody services.

Prior to that, in February, Minnesota became the second U.S. state, behind Indiana, to outlaw crypto ATMs and kiosks, claiming that they were primarily used in scams and fraud.